Rebound in copper unit buoys Rio
Rio Tinto shares rose strongly on Tuesday after the miner revealed a surprisingly strong rebound by its copper division and a consistent performance by its flagship iron ore business.
n an upbeat set of September quarter results, Rio said the impact of a wall slide at a copper mine in the US would not be as bad as first thought, and the miner improved its full-year copper guidance for the second time.
The most recent estimate of 565,000 tonnes of copper over the year was upgraded to 590,000 tonnes, coinciding with stronger copper prices over recent weeks.
The mine that suffered the wall slide, the Kennecott operations in Utah, will now produce the extra 35,000 tonnes.
Deutsche analyst Paul Young said the faster than expected recovery in Utah was the highlight of Tuesday's report.
"This is a very strong result, this operation will end up doing close to what it was expected to do before the wall slip," he said.
Copper ranks as Rio Tinto's second most important division, and has this year begun production at the Oyu Tolgoi mine in Mongolia, as well as continuing with its joint venture at Escondida in Chile.
"If we see OT and Escondida continue to perform strongly they can actually exceed their guidance for the full year," Mr Young said.
While Oyu Tolgoi is producing at close to the desired rates, Rio is still unable to fully cash in on its new mine, with a customs stoush in China preventing buyers from collecting their purchases.
The impasse is preventing Rio from collecting revenue from the buyers, but the miner said it hoped to have the issue resolved soon.
Rio's iron ore division remains on track to produce 265 million tonnes this year, after a solid quarter that saw Rio produce 53.3 million tonnes.
There was no update on whether Rio would further expand its Pilbara iron ore division to 360 million tonnes a year, with the board set to decide on that matter next month.
Rail and port facilities are able to export 360 million tonnes but extra mines would be required to reach the target.
Expanding to 360 million tonnes is expected to cost about $US5 billion ($5.2 billion), and chief executive Sam Walsh has said the company will eventually reach the target but at a speed of development that is yet to be decided.